K-C, Unilever Turn Down TV to Ramp Up ROI

Giants Pare Spots, Add New-Media Approaches in Push for Efficiency

BOCA RATON, Fla. (AdAge.com) -- As proof that it's spending its marketing dollars wisely, Kimberly-Clark Chairman-CEO Thomas Falk told analysts last week that the company expects to spend only 46% of its marketing budget on TV this year, down from 60% in 2004.

Encompasses everything from digital to shopper and experiential marketing Source: Company reports

"If you looked two or three years ago, out of our top six consumer brands, TV would have ranked as the most popular channel for all six," Mr. Falk told attendees at the Consumer Analyst Group of New York last week. "Today, TV might be ranked as the best channel for only three of those brands."

Package-goods titan Unilever also is out to prove it can spend more effectively, in part by using TV more cannily.

Beating P&G
Both companies are coming off some of their best sales-growth results in many years -- up 6% last quarter organically (excluding currency and acquisition effects) despite a slowing U.S. economy. In the process, they've been beating their big common rival, Procter & Gamble Co., which has had organic top-line growth of 5% in recent quarters.

But both have paid dearly for that growth. Unilever has stepped up global advertising and promotion spending by $1.5 billion since 2005 to a reported $7.8 billion last year, Chief Financial Officer James Lawrence said at the analyst conference last week.

K-C's marketing spending was up $50 million last year (from a reported $438.4 million in global ad spending in 2006) despite the pressure of rising commodity costs, Mr. Falk said in the company's CAGNY presentation. K-C plans to keep using restructuring savings to raise spending ahead of sales this year and next.

What that doesn't translate to for either company, however, is more TV ads. For Unilever, in fact, it means creating fewer ads, even if each ad gets more spending behind it. Knorr, Unilever's biggest global brand, with more than $5 billion in sales, has cut the number of TV ads it produces from around 130 in 2005 to around 30 projected this year.

Streamlining
"By focusing on fewer, bigger innovations on the Knorr brand, we've reduced the number of TV productions by two-thirds," Mr. Lawrence said. "It means fewer, bigger campaigns, allowing us to get the best out of our ad agencies; spend less on production; produce fewer, higher-quality films and copy; and free up money to spend on more TV time and space."

Making the reduction possible is a more globally streamlined Unilever organization that is focusing on fewer, bigger global product launches, he said.

Another manifestation of the fewer, bigger approach is Unilever's $1.5 billion Sunsilk brand, which unveiled a global campaign with an ad on the Super Bowl earlier this month. The ad launches a single global positioning around the "Life Can't Wait" selling line developed by BrandThinkTank, Paris, which succeeds a variety of regional campaigns.

Producing fewer ads doesn't appear to be a trend among advertisers generally, at least not yet, said Fran Furtner, president of MRA Advertising/Production Support Services, Cincinnati, which consults on commercial-production management for 15 of the top 100 U.S. advertisers. She said some clients are cutting back on commercial production, but mainly because they're diverting more spending to digital media.

K-C falls more into that camp, as the company has moved away from TV and other former mainstays of its marketing mix in recent years in favor of online and other nontraditional media.

Nontraditional jump
Nontraditional spending -- everything from digital to shopper and experiential marketing -- should reach 34% of the company's budget this year, up from 10% in 2004 and 25% last year, as print spending declines to 20% this year from 30% four years ago.

In place of TV, K-C is focusing more a variety of other things, including packaging design, which Mr. Falk said "was not on the radar screen to any extent for any of our brands" a few years ago. "Today packaging design is a marketing channel and is one of the top channels in five of our six [top brands]."

Another mainstay of package-goods marketing, coupons, has been taken down several notches at the company. "It's not a top channel any longer for any of our top six consumer brands," Mr. Falk said of coupons in newspaper inserts.

Still, K-C faces skepticism on its marketing turnaround. Sanford C. Bernstein analyst Ali Dibadj said in a note before Mr. Falk's talk that some investors expected K-C to evolve into "a true marketing company" after the appointment of Tony Palmer as its first chief marketing officer in late 2006. Now, he said, they're growing skeptical that marketing can make a difference in some of the company's "commoditized categories."

But Mr. Falk said K-C is seeing returns from the efforts by Mr. Palmer and other marketers. He said K-C is growing market share in key categories, including diapers, where it picked up about a share point across all channels last year behind 17% sales growth globally.

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Jack Neff

Jack Neff, editor at large, covers household and personal-care marketers, Walmart and market research. He's based near Cincinnati and has previously written for the Atlanta Journal Constitution, Bloomberg, and trade publications covering the food, woodworking and graphic design industries and worked in corporate communications for the E.W. Scripps Co.